Proposed swipe fee cap for debit cards could cost consumers

December 20, 2010|by Cara Restelli, KY3 News | crestelli@ky3.com

SPRINGFIELD, Mo. -- It soon could be cheaper for stores to swipe your credit card. The Federal Reserve wants to limit interchange fees on debit cards; that's what businesses pay the credit card network each time a customer uses a card.

One proposal is to cap those swipe fees at 12 cents per transaction. That would be good news for store owners but not necessarily for shoppers.

With every swipe of a customer's credit or debit card, Sandra Harrison, owner of Gamble's Gift II, has to pay.

"Whatever your bill is, the merchant is going to pay a percentage," she said.

For debit cards, the swipe fee is just 1.05 percent of the total purchase price. That may not sound that bad but, in a busy holiday season, Harrison says it adds up, making it difficult to keep down prices and keep the services that she's proud to offer, like free gift wrapping.

"It doesn't seem fair but it's all part of the system," she said.

What's worse, checks and cash have become things of the past for many people, which means more fees with every transaction.

"Every retailer struggles to pay fees," said Harrison.

That's why Harrison is in favor of the proposal to cap those swipe fees at 12 cents per transaction. Overall, it would mean a drop of as much as 90 percent.

Many industry analysts worry banks would make up for their revenue losses by charging customers fees for using debit cards. That's something Harrison doesn't like.

"A consumer is not going to like that," she said.

In addition to charging a fee to use your debit card, industry analysts say it's likely that credit card companies would phase out reward programs for debit cards.

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